McCain and Obama on healthcare

CNN, which was hotly denying the rumors of Clinton’s concession until as late as last night, has an article up about the policy differences between the Obama and McCain. The article they link to for a critical analysis of the candidates plans is entitled, “Why McCain has the best health-care plan”. Way to be impartial, CNN. Nonetheless, it’s a good article with lots of great detailed information on exactly how the two proposed policies would work, even if the conclusion presented in the title seems a little forced.

I’ll summarize the information from the article, and you can see if you come up with my conclusions, or the conclusions of the author.

McCain

McCain’s plan would eliminate the employer-paid healthcare plans in favor of a tax credit for buying insurance. He’s not abolishing the employer-paid plans, just making the cost of the plan be considered as taxable income, and offering a credit to offset the extra taxes you’d end up paying. This is thought to lead to via the free market to employers dropping the plans entirely in favor of simply paying employees more, which they can then spend on individual or family plans. It’s also assumed that people would contribute income to an HSA, so combining the increase in income + plus the tax credit would allow people to afford high-deductible, low-premium plans and pay out of pocket for anything else. To apply a little more free-market action to the health insurance industry, he’s going to allow health insurance to be sold across state lines, so a person in Mississippi could buy insurance from a Pennsylvania insurer, subject to Pennsylvania laws. This allows healthy, young people to find cheaper plans which cover less, but would result in increases in the cost of the more comprehensive plans, as they become increasingly composed of the expensive to care for old folks. The overall idea is that insurers will have to compete to get business, and this will make insurers pressure hospitals to reduce costs.

Obama

Obama’s plan has two components: a private and a public part. The public part is essentially Medicare as we have it today, and the private part is an employer-provided healthcare plan similiar to the federal employee healthcare plan. Employers can choose whether to offer the private plan or pay a tax to fund the public plan. The plans have a wide range of benefits, more than young people need, so the deductible isn’t as low as it could be under a free market system, but it will keep the comprehensive coverage plans from spiking in cost. Supposedly employers will all drop their plans and pay the tax to fund the public program. Under this system, the individual isn’t making much choice about which plan to get, rather it’s the insurance companies that have to figure out a way to lower costs if they want to increase profits.

Fortune’s conclusions

McCain’s plan is good for the country because the extra choice provided the consumer will result in lower prices for insurance in the long run, except maybe for old people.

Obama’s plan is bad for the country because health care spending will go up as more people take advantage of their access to health care.

Obama’s plan is bad because it offers benefits like chiropractic and wart removal and other non-acute illness treatments

My conclusions

McCain’s plan is good for me because us healthy youngsters don’t have to subsidize the old fogeys anymore.

McCain’s plan is bad for me because you know we’d just end up subsidizing them anyways.

McCain’s plan is bad for the nation because old people and people who can’t afford the assumed HSA contributions will just have to stay sick until they’re eligible for disability.

McCain’s plan is bad for me because it assumes that my employer would increase my pay by the cost of the healthcare plan they’re no longer paying. Realistically, it’ll be some fraction, and the fraction will be even smaller for those employees paid the least.

McCain’s plan is bad for the nation, because it assumes that everyone has the same economic incentive to contribute to an HSA. Low income people have less need for that tax break.

McCain’s plan is bad because more people will end up sicker, with their only hope being that costs eventually decrease to the point that someone will be able to afford to cover them.

Obama’s plan is good for the nation because giving people access to preventative care will reduce health care costs.

Obama’s plan is good for the nation because the administrative structure is already in place. There’s no need for an additional bureaucracy to determine how to subsidize the insurers.

Obama’s plan isn’t bad for the nation because people don’t generally seek out medical treatment when they can otherwise avoid it. If costs increase, it’s probably because people who needed treatment are now getting it, as opposed to getting treatment they don’t need.

Obama’s plan isn’t bad for the nation because it covers things Fortune magazine deems unnecessary. In fact, that whole argument smells like a strawman.

Obama’s plan isn’t bad for the nation, because there will still be pressure on the hospitals to reduce costs; It’ll be the only way the insurers can make a profit if they can’t cherry-pick healthy people like McCain’s plan allows.

Obama’s plan is good for the nation, because if he’s elected, we’ll have billions of dollars formerly spent in Iraq to throw at the problem!

Would it be too cute to say McCain’s plan would make health insurance like the airline industry, whereas Obama’s plan would make it like the public school system?

About Mr. Gunn

Comments (13)

Umm, the way you explain it, McCain’s plan will eliminate group insurance rates for everyone. It will not force cheaper rates through the free market system but raise rates for everyone.
Folks now in MS can buy insurance from PA as long as they qualify for the PA plan.

Yeah, I think you’ve got it right. They say that free market competition will lower rates eventually, and it will, but I wonder how long it will take and how big an effect it will have. For one, there’s rate lowering pressure in both plans, but also, McCain’s plan seems to favor the wealthy, who can actually benefit from tax breaks and HSAs, and the young, who’ll be able to buy cheaper plans, reducing the risk pooling and forcing higher rates upon those who opt for comprehensive coverage.

I’m a young guy. By that logic, I should be voting for McCain because I’m young and healthy, but I just can’t do it. Not after the past 7+ years of misery.

You won’t be young forever, hopefully. Then you’ll see what the free-market effect of inurance rates does to you. You’ll be excluded for any reason at all, even having seasonal rhinitis. it’s something that cannot happen in a group plan- the risk is spread throughout the group. McCain’s plan has been panned by every major medical economist.

It’s really hard to decide, but as a Toronto life insurance broker I believe massive pooling is inevitable. Yes, market driven system would be more “powerful”, on the other hand, some (substantial) number of people would be excluded. That’s how market works. You can allow it, when speaking about car market or real estate market (if you can’t afford big house, you will not have it), but not when speaking about health care. On the other hand, some market force is inevitable. Our socialized health care system is not perfect as well. It’s simply about balancing…
Lorne

[I believe this comment and the one above are attempts to rank high for certain keywords, but it appears to have been human written, so if you’d like to say something of substance, post again and I’ll let it slide. I’ve even got nofollow disabled. -ed]

The real long-term solution to making health care more affordable is to make the system more efficient. I think we are headed for a new era of health care reform where health care coverage is no longer separated from health care delivery. This will only happen when there is an electronic infrastructure built by private-public partnerships.

Now when the year has passed from the time when this article was posted, and we have Obama as a president, we will be able to observe how Obama’s health care plan will work. After reading your article, I don’t see any positive points in McCain’s health care plan. I am happy that we are now living under the democrats, not republicans, because as you said, millions of dollars would be still going to Iraq rather than support our health care system. Thanks for the explanation of Obama’s plans good sides because I am making a college work on it now and it would be very useful for me.

Even though reforming our health care system is likely to put me out of a job, I think that reform could be very good for the nation.

I’d like to see a voucher system that works similarly to the Medicare Advantage policies. By default seniors will get Original Medicare. They can opt out of Medicare and essentially get a voucher that they can use to fully or partially fund the cost of a plan with a private insurer.

The private insurer cannot deny coverage based on medical history, so pre-ex isn’t an issue.

Fining people who can’t afford coverage makes no sense to me. We should all get insurance by default. In fact, I think that is the only way it will work.

When I read the article the only problem with McCain’s plan is that if your company drops the health care plan you would get paid more but if you can’t get health insurance or your premiums are still too high then you’re in serious trouble when it come to getting insurance for you and your family. But then i noticed that a person could buy insurance across state line which would give greater competitions and offer more services and opportunities for insurance which could potentially work.

Well, how is Obamacare treating you as we walk into the new year? For me, some of my clients are getting a 200% increase in their rates based on the “new health care law”. “Some people” wanted it, wanting it I mean “everything” in their health insurance plan. Get ready to pay for it.